E D I T O R I A L S

Guest Column by Congressman David E. Bonior
"Investigation into Soaring Gas Prices Needed"

July 12, 2000

As we approach the height of summer, families across Michigan are finding that one thing stands out – soaring gas prices. For many families, gas prices reaching near two dollars per gallon are making even the most routine trips to work and the supermarket unaffordable. For others, rising prices at the pump are preventing them from taking that summer road trip they’ve been anticipating.

While gas prices are high throughout the country, Midwestern consumers are suffering the most. Gas prices in Midwestern states are higher than in any other region in the country by as much as 50 cents per gallon. This stark contrast makes me wonder what or who is responsible for sudden, skyrocketing gas prices in the Midwest. Gas stations do not seem to be the ones reaping profits from recent gas price hikes -- they often earn as little as five to ten cents per gallon and are told how much to charge per gallon by oil companies. It is these big oil companies who decide how much gasoline to release into the market, and thus, often determine the price of gas and how it is distributed. Instead of setting prices according to market value, major oil companies are arbitrarily raising prices to record levels. Sometimes prices are based on nothing more than where the gas is to be sold – for no apparent reason, gas in Detroit is sold for less than gas in Mount Clemens.

While our wallets are being emptied at the gas pump, major oil companies are experiencing record profits. It is these oil companies who saw their first-quarter profits rise about 400% over the same period in 1999. While the five largest producers of oil and gas had a combined profit of roughly $3.6 BILLION during the first three months of 1999, their combined profit for the same period in 2000 was about $11 BILLION. To make matters worse, three recent mergers involving six major oil companies have shrunk the industry considerably – limiting much-needed competition in the industry and forcing prices up.

Clearly, something is wrong. The world’s largest oil companies are experiencing record-breaking profits while Michigan’s consumers are paying more than ever before. Michigan’s consumers and small business owners are demanding to know why, and they deserve an explanation.

That is why, when Michigan gas prices began to soar, I called on the Federal Trade Commission (FTC) to conduct a full-scale investigation into the recent gas price hikes in Midwestern states and examine how pricing practices, mergers, and distribution practices of the major oil companies may be the cause of high gas prices. Just days later, the FTC announced that it would begin an investigation, now underway, into possible price gouging and violations of anti-trust laws. The FTC has already begun serving subpoenas to those involved in the gas supply chain in the Midwest, and the House Commerce Committee held a hearing on June 28 to look into the role that oil companies have played in rising gas prices. We need to make sure that this investigation will be completed swiftly so that Michigan consumers can get the relief and answers they need now.

In the meantime, it is important that we consider other ways we might be able to reduce the price of gas. First, we need to restore the President’s power to release oil from the Strategic Petroleum Reserve. This would increase the supply of gas in the U.S. market and bring down prices. Second, we need to stop Alaskan oil from being shipped to Japan instead of being distributed for American use. In 1995, I voted against legislation which lifted the long-standing ban on the export of Alaskan oil. Currently, over sixty thousand barrels of Alaskan oil a day are being sent to Asia. That is why I recently called on the Administration to reinstate the ban on Alaskan oil sales to Asia. At a time when Michigan families are paying outrageous prices at the pump, we should not be shipping our oil to Japan.

As this process continues, I will keep fighting for Michigan consumers and demand that major gas corporations lower the price of gas to a reasonable level. No matter how much prices come down over the next several weeks, we deserve to know why we have had to pay outrageous gas prices for so long and how the practices of major gas corporations may be the cause of high gas prices in the Midwest. Michigan families should not be taken advantage of at the gas pump, and we should take care to see that those responsible are held accountable.

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